Federal Budget

The aim of the Ministry of Finance is to assist the development of the Federal Government of the United Arab Emirates.  Whereby to double the state's potential to achieve rapid, sustainable and equitable development through strengthening their ability to efficiently and effectively manage the public resources at the federal level, with focus on the role of the federal government in sustainable economic growth.

1. Public Expenditure Management

Budget must be a reflection of the economic and social choices.  The Federal Government needs other factors to fulfill the role assigned to it by its people, among these factors:

  1. Collect sufficient resources from the economy in an appropriate manner
  2. Allocation and use of resources efficiently and effectively, and public expenditure management belonging to Group II and thus being one of the most important instruments of fiscal policy.

As a central instrument of fiscal policy, public expenditure management follows the three objectives of the economic policy. The financial stability calls for fiscal discipline, and to achieve economic growth and justice through the allocation of government funds for various sectors, and most obviously, all three goals require efficient and effective use of resources. Hence, the three goals of the overall policy translate into three key objectives of public expenditure management:

  1. Financial commitment (expenditure control)
  2. Allocation of resources consistent with policy priorities (strategic allocation)
  3. Good operational management. Good operational management therefore calls for the economy’s (the acquisition of quality inputs at the lowest cost) efficiency (minimizing cost per unit of output) and effectiveness (achieving the target yield of each entrance).

1.1 Federal budget law statute

The new Organic Law amending the Federal Law No. 14 of 1973 on the rules of the preparation of the state budget and final account will be implemented starting from January 2005. Primary objective of this new law is to improve public expenditure management framework oriented towards achieving results and raising performance.
The Federal Government has taken this step out of a vision of the rapid changes in the general atmosphere and the growing needs of the community. This vision needs the participation of all stakeholders of the civil service in the federal government and their determination to maintain the level of public services and improve efficiency.

Technical Notes:

The new law of the Budget


The new law for the budget of the UAE

1.2 The Macroeconomic framework and financial goals:

The ability to translate policy priorities into the federal budget, and to ensure conformity of actual expenditures with the federal budget, depends to a large extent on macroeconomic projections and revenue forecasting. Overestimating revenue leads to weakness in the preparation of the budget and therefore poor in its implementation.
The preparation of a macroeconomic framework is an important element in the process of budget preparation, and the preparation of this framework will be a renewed process. We must define a set of objectives to establish an initial idea and preliminary to this framework. The final framework requires a process of consensus and convergence of all objectives and targets. The macroeconomic forecasting is not just a simple forecast of the economic variables. Projections are based on setting goals and tools in various fields such as monetary and fiscal policy and rate spread, currency exchange rate and trade policy, regulation and promotion of private sector activities and improve the performance of independent bodies. Lastly it should cover the current year and a future period of two years or four years.
The establishment of clear financial targets gives a framework for the formulation of the federal budget and the federal government can determine fiscal policy and the Cabinet to monitor the implementation of federal government policy. It must also include goals and financial indicators in three areas:

  1. The current financial situation (for example, the fiscal deficit),
  2. Financial stability (eg tax rates or expenditure to GDP),
  3. Vulnerability (eg analysis of external debt, if any).

The process of preparing the macroeconomic framework must be made a permanent process. This needs to be prepared at the beginning of each session of the federal budget to provide adequate guidelines to the ministries and federal authorities. As noted, these guidelines should occur later in the advanced stages of preparation of the federal budget, and economic variables must be taken into account. Also, in the implementation phase of the budget, estimates of the macroeconomics need to be updated continuously to assess the impact of external variables, or any disruptions during the process of implementing the budget. In addition to the basic framework, it is important to formulate variants under different assumptions, for example, the change in oil prices. We must assess the risks related to unexpected changes in macroeconomic policy response and identify the changes in advance.

1.3 Medium-term expenditure framework

Can be defined as a strategic policy of the Government and a total expenditure framework through which given the ministries and federal authorities greater responsibility for making decisions on the allocation and use of resources. The key to the success of the medium-term expenditure framework as a mechanism of institutional mechanisms is to assist decision-makers to strike a balance between all the available resources and the priorities of the State. It includes a medium-term expenditure framework on the roof of the budget is estimated from top to bottom and on estimates from the bottom of the running costs and costs in the medium term of existing policies and to match these costs with available resources, respectively.

Medium-term fiscal framework: the first and necessary step towards the medium-term expenditure framework. It typically contains a statement of fiscal policy objectives and an integrated set of objectives and forecasts of macroeconomic and financial medium term.

Medium-term budget framework: This framework is based on this first step to make estimates of the budget over the medium term the expenses of each federal basis. The objective of a medium-term budget is the allocation of resources for the nation's strategic priorities and to ensure that these allocations are consistent with overall fiscal objectives. This gives some degree of predictability to spending federal authorities at the same time ensuring overall fiscal discipline. In fact, the medium-term budget framework is the base type of the medium-term expenditure framework.
Medium-term expenditure framework: this framework is to develop the process further by adding elements of activity and budget based on the output of a medium-term budget framework. These methods seek to enhance the value of money in the process of government spending, as well as to encourage financial commitment and the development of strategic priorities